Tax apparent tax evaders

To sustain the country’s economic growth, apart from calls for fresh investments (foreign and domestic), there is a need to go for state-funded infrastructure projects. Thus, the “Build, Build, Build” initiative. Consequently, the national government shall be continuously running on a tight budget.  So that, given such predicament, the Bureau of Internal Revenue (BIR) will explore all possibilities imaginable to meet revenue targets.

For one, as we now know, the government offered a tax amnesty on income taxes and estate taxes. Moreover, they are also toying the idea of raising sin taxes again. Well, this is not something new.  Just like in the past, in meeting revenue targets, tax amnesties were offered or existing taxes were raised.    Simply put, same old taxes with higher rates imposed on the same old taxpayers.

Just like the past administrations, this time, the government also hopes to replace lost taxes (especially, on account of lost taxes from compensation which this administration had given away) through better tax administration or higher collection efficiency.

What is really new is that, the government wishes to recover more (through further tax reforms) by limiting the income tax holiday to up to 3 years only plus a year extension if the new applicant/taxpayer invests in agribusiness, or in less developed areas, or if it is relocating outside Metro Manila and adjacent urban areas.

The supposed tax reform further proposes that beyond the income tax holiday, the taxpayer shall enjoy a special rate of 18%, 17%, 16%, 15%, 14% and 13% from 2019, 2021, 2023, 2025, 2027 and 2029, respectively, of its net income. This proposed reform is put forward to hopefully expand or widen our tax base.

However, whether these tax reforms may encourage existing investors to expand or encourage newcomers to put in their money (thus, widening our tax base and, consequently, raise government revenues), we do not know. What is really certain is that there are groups of taxpayers who are clearly identifiable and have continued enjoying tax-free status for decades. They are our street entrepreneurs a.k.a. sidewalk vendors. These entrepreneurs are selling their wares, like, bootleg DVDs, fake designer-garments, etc., on the streets.

These items, depending on where these are made or plagiarized, find their way to the Philippine market either through wicked importers or smugglers (obviously, tax evaders too). These items are undocumented and sneaked into the country through the backdoor. Since legitimate business establishments demand for BIR registered receipts, these items seldom go through the normal distribution channels like department stores or specialty shops. Finding difficulties through legitimate channels, these unscrupulous beings found some advocates in our sidewalk vendors.

Incidentally, calling them sidewalk vendors isn’t degrading but an understatement. It is a fact that most of them have entrepreneurial smarts. They are selling their wares on the streets by choice and have only preferred to be labeled as such (sidewalk vendors) to justify their tax-free existence. Most of them never went for employment because they chose to become employers themselves. Sadly, despite all these opportunities, they have remained tax-free.

Likewise, there are motorcycle-riding Indians who ply their lending businesses from one stall to another on a daily collection basis.  Ironically, these tax-exempt individuals are using roads that are built and maintained by honest taxpayers’ money.  Through the manner by which they carry out their businesses, interest charges are certainly higher than banks, pawnshops and lending investors.  Yet, they never drop even a single cent to our government coffers.

These Indian lenders should show respect on us Filipinos. They should realize that they are taking advantage on our hapless brothers’ helplessness by sucking exorbitant amount of interests from their meager earnings. At least, they should show respect by registering their lending businesses.

Indeed, they are everywhere and too many to be missed.  Therefore, identifying or taxing them isn’t difficult to do.